Auto sector could learn from Austria

Slovakia and Austria, two small countries located in the centre of Europe share an especially significant feature – the automotive industry is a strong pillar of their economies. But while in terms of the number of vehicles produced annually Slovakia significantly surpasses Austria, the Austrian automotive sector is oriented more on a network of strong suppliers leading to higher revenues. The Slovak Spectator spoke with industrial analyst at the Revue Priemyslu magazine Martin Jesný about the automotive industries in both countries as well as the future of the automotive industry.

The Slovak Spectator (TSS): What is the main focus of the automotive sector in Austria?

Martin Jesný (MJ): The automotive sector in Austria is a classical, very strong, industrial sector that follows the latest trends. These include shift of parts production and development from carmakers to suppliers. Several Austrian companies started on this path decades ago. As a consequence, there is no traditional carmaker factory in Austria as we know them in Slovakia, like Volkswagen or Kia, but plenty of specialised suppliers, often with sophisticated R&D and generating production with a high added value.

TSS: Does this mean that Austria does not produce any cars?

MJ: It does, but only on a contract basis. Magna Steyr, a branch of a Canadian company, has a contract manufacturing plant in Graz. This means that the plant is like those we have in Slovakia, but it does not belong to any carmaker. It assembles cars based on contracts from various carmakers while it focuses on the assembly of complicated, and thus expensive, cars. For example, this summer it will start assembling BMW’s new 530e plug-in hybrid. BMW also has an engine production plant in Austria. There is also production of trucks and special vehicles.

Nevertheless, even though the finalisation of cars in Austria is much smaller than in Slovakia, its automotive sector, thanks to its strong suppliers, generates total revenues much higher than in Slovakia.

One also has to say that Austria has been historically strong in the automotive sector, as it has participated significantly in the development of car manufacturing in general. This has led to the existence of numerous family businesses that have grown into significant market players with an international reach.

TSS: Could you list some of them?

MJ: For example, Miba, which also has two production units in Slovakia. Founded in 1927, it has developed from a small family business into an international company with very sophisticated production based on powder metallurgy and a very special way of processing metals.

Its importance does not lie in the quantity of what it produces but because it is bringing new products to the market. These innovative products it develops in cooperation with universities and researchers.

Another one is ZKW, founded by Karl Zizala in Vienna in 1938. It produces lights and electronics for cars and also has a production unit in Slovakia. It is another example of a family business that grew into an international player.

TSS: Is this something Slovakia can learn a lesson from?

MJ: Absolutely. These companies have grown because the state helped to create a supportive environment in Austria, in which they thrive. But instead of direct financial support this rather includes education, not only dual but also secondary and university education, as well as industry-oriented research and development at universities and R&D institutions. Thanks to this the Austrian automotive sector has attracted international companies with strong R&D like Bosch, Adient, which is the former automotive arm of Johnsons Controls, Benteler, and Mahle, to only name a few. All these are really strong, global players. In addition to this, such an environment helps local businesses grow into what is known as hidden champions, which means relatively small but highly successful companies which are often highly specialised.

Another feature worth mentioning is the creation of clusters that have concentrated around not only production but also R&D. One such cluster has grown around Magna in Graz, the Styrian Automotive Cluster ACstyria Autocluster. It was founded in 1995, and during recent years it has even widened its field of action by aerospace and rail systems. Now it concentrates on top R&D activities and is a very strong source of innovative ideas and patents not only among traditional automotive R&D but also in newer fields, like electric cars and related technologies.

TSS: Which parts of automotive production should Slovakia focus in terms of R&D?

MJ: Currently there is a lot happening in mobility in general, as this is something that our society is now undergoing. This is because more people are moving into cities and production is becoming more globalised. As a consequence, all the transportation of people and goods will have to transform. But we do not yet know what exact form it will take. This may include autonomous cars, car sharing, aero taxis, electric cars but also travelling in ultra high-speed tubes. All these create opportunities for development, new ideas and technologies.

To sum it up, while Slovakia will hardly set the Thames on fire in developing combustion engines, it can assert itself very well in new fields. This is because as Slovakia does not have any history in development of combustion engines, which is vital for the successful continuation of their development, it is at comparable levels in other fields that have only recently come into focus. We have, for example, experts in production of aluminium products that are needed for production of lightweight vehicles, or a growing company in Slovakia, engineering carbon-fibre structures for next-generation cars and aircraft – c2i. Slovaks are also successful in research of graphene. This material is used in the automotive industry and in the energy sector. Another very promising and prospective sector is IT, as more and more information technologies are used in cars and related systems.